Petrol prices fuel inflation drop

12 April 2012

Inflation remained above the Bank of England's 2% target for the fifth successive month despite the hefty impact of a record fall in petrol prices.

The Consumer Prices Index (CPI) rate of inflation managed to edge down to a cooler 2.4% in September compared with a rate of 2.5% a month earlier.

However, economists had predicted the drop and have warned it does not mean inflationary pressures have gone away, with many believing the Bank will still hike interest rates later in the year.

Last month's fall was sparked by a record 6.4p per litre drop in the price of petrol from 97.5p in August to 91.1p in September, with diesel experiencing similar falls.

Elsewhere, rising prices of furniture and electrical goods had an upward effect on inflation, with higher fees for part-time education classes also impacting.

Food prices increased, especially fruit, while there were also higher cost pressures on mineral water, soft drinks and juices during the month.

A lower rate of inflation in September is unlikely to deter the Bank's Monetary Policy Committee (MPC) from hiking interest rates in November from 4.75% to 5%.

Analysts believe last month's fall will be a blip, with the impact of higher university tuition fees likely to pump the rate back up in October.

The Office for National Statistics today admitted that fees would impact on both the October RPI and CPI figures, with the maximum cost rising from £1,175 to £3,000 for many students.

It is thought that fees could add a quarter of a percentage point to inflation next month, with spiralling utility bills also continuing to filter through later in the year.

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